893.51/2854a: Telegram
The Acting Secretary of State to the Minister in China (Crane)
158. Supplementing Department’s 40, February 12, 6 p.m.3
Pacific Development Corporation advises the Department that the Chinese Government which has refused to permit the functioning of the Associate Inspector-General of Wine and Tobacco Administration as provided by Article 10 of the loan agreement of November 26th last4 has nevertheless indicated its intention to terminate all rights granted by that contract with respect to the revenues of that Administration in the event of the Corporation’s failing to exercise the option for a further loan specified in Article 11.
You will advise the Chinese Government that this Government regards the provisions of Articles 10 and 11 as interdependent and could not acquiesce in the contention that the specified period of seven months for the option should begin to run against the Corporation so long as the Chinese Government is in default. This is the more apparent in view of the annex referring to Article 10 of the loan contract which provided that the Corporation would retain its rights for a year even if it rather than the Chinese Government were in default.
The Department has been advised by the American Group and the Corporation of the existence of an understanding between them for the pooling of the latter’s rights into the consortium. You will so advise the Chinese Government when notifying it of this Government’s [Page 647] position that the Corporation’s option under Article 11 should be construed as running for seven months from the date when the American Associate Inspector-General is enabled to function with the effective authority contemplated by Article 10.
Advise your British, French and Japanese colleagues of the action taken under this instruction.
Repeat as number 244 to Tokyo for information only.